Inventory is one of the largest investments of capital for most fast food restaurants. It is imperative that fast food restaurants are able to manage their inventory levels effectively. This is why most fast food restaurants like McDonald’s have decided to implement a Just In Time System. Implementing a Just In Time system will allow companies to manage their inventory effectively in to order to meet customer demands and to keep inventory costs as low as possible. McDonald’s a very popular fast food restaurant was establish in 1955. It has been fifty eight years since their establishment and yet this successful company is the number one leading global foodservice retailer. There are many different ways on how McDonalds remained competitive since their establishment. One reason in particular is because of their implementation of a Just In Time system which contributed to significant cost savings. Managing inventory effectively in a fast food restaurant is not an easy task. Most McDonald’s franchises across the globe have to make sure they have enough inventory to be capable of fulfilling endless amount of orders a day in a short period of time. Prior to the implementation of a Just In Time System, McDonalds had high inventory costs. The operation that was in place involved precooking a variety of meals and allowing them to sit under heat lamps as long as possible until an order was placed. This reduced the quality of food. Anything that was not sold was discarded. This old system produced at a level that gave McDonalds high inventories along with high ordering and holding costs. It also made prices rise in order to absorb the scrap costs of unsold food. However, since the implementation of a Just In Time system McDonalds was able to stop the increases in ordering and holding inventory costs. In addition, they were able to improve the quality of their meals and invest into new equipment from decreasing inventory expenses. From the upgrades...
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